Ethereum (ETH) Loses Support Above $3,300 as Crypto Market Corrects

Bitcoin and other top altcoins, including Ether, made substantial gains earlier this week – the latter climbing from around $3,140 on Sunday to a two and half month high of $3,470. However, it has relinquished a portion of these gains in the last few hours on the back of waning bullish sentiment. The latest slide, which has affected cryptocurrencies across the board, appears to have been spurred by reports of the EU voting in favor of imposing KYC guidelines on ‘unhosted' wallets.

Last Saturday, Unstoppable Finance's Patrick Hansen shared details of the Thursday ECON vote, noting that some of the items featured in the draft threatened the privacy and decentralization fabric of the industry. Much like Hansen, the wider crypto industry opposed the vote, with notable names taking to social media to criticize the proposal. Coinbase CEO Brian Armstrong, in a Wednesday tweet, expressed his frustrations ahead of the vote, labeling it as ‘bad policy.'

The controversial legislation piece received backing from more than 90 EU lawmakers during yesterday's vote, as per a CoinDesk report. Bitcoin price reacted to the news, dipping roughly 5% on the day to $44,835 as per CoinMarketCap data. Altcoins, led by Ether, have also taken the hit, with most of them seeing losses in the range of 4% to 10% in the last 24 hours. The premier token fell from an intraday high of $3,435 and was last spotted at $3,280.

Grayscale report draws a comparison between Ethereum and New York City

Outside the market, Grayscale has released a new report on smart contract ecosystems. Exploring the current state and market position of smart contracts platforms, the digital currency investment firm equated Ethereum to a digital New York City. Notably, Ethereum was the first blockchain to launch smart contract functionality. The introduction of the Ethereum Virtual Machine enabled developers to build decentralized applications for custom uses.

Grayscale wrote that as the number of users seeking to deploy smart contracts rose significantly in the early days, Ethereum offered the most viable platform. As a result of more users flocking to the ecosystem, its capacity slowly started becoming constrained. This was consequently followed by high transaction fees and reduced performance in transactions per second (tps). The worry about fees became even more apparent last year with the boom of the NFT space and unrelenting interest in DeFi, pushing the fees above $10, a period during which competitors gained massively.

According to the digital asset management firm, this state of matters (for Ethereum) compares directly to New York. Similar to the Big City, Ethereum is extensive, expensive, and congested in some parts. The report added that despite these negatives, Ethereum also features a highly robust ecosystem around it, with in excess of 500 dApps having a total value of more than $100 billion – a reflection of New York's rich demographic.

Even though Ethereum will likely continue being the epicenter of this space, Grayscale opines that its ‘unfriendly' traits will continually push more people to move into other digital cities (blockchains), including Chicago (Avalanche – a smaller, cheaper, and less congested New York) and Los Angeles (Solana – a distinct in structure network that prioritizes low fees and high tps).

The report also highlighted the importance of Ethereum L2s such as Polygon, which the firm compared to a skyscraper in New York, as its growth comes from its scaling upwards. Worth noting, Grayscale recently debuted an ex Ethereum fund focusing on alternative ecosystems, including Polygon and Cardano.

Bloomberg strategist brands Ethereum ‘collateral of the internet' amidst March price surge

Via a tweet posted on Wednesday, Bloomberg's senior commodity strategist Mike McGlone observed that the mood around Ethereum is positive, and metrics indicate that the price will go up even further.

McGlone cited the concurrent increasing demand and reducing supply of the largest altcoin, adding that the behemoth network beneath it remains critical to the evolution of the larger DeFi space. The Bloomberg analyst also noted that Ethereum remains the go-to chain for tokenization of assets and is equally a chief platform for NFTs, leading him to label it the ‘collateral of the internet.'

True to McGlone's assertion, March was largely a good month for Ethereum, whose market capitalization swelled towards the end of the month in anticipation of the Merge with the Beacon chain. The market cap grew from $345 million on March 21, reaching as high as $416.9 billion on March 29.

To learn more about Ethereum, visit our Ethereum guide.